In a recent local TV interview, the Caucasus GEFF’s Project Manager, Gernot Kuhlisch, answered questions about the GEFF in Armenia, its activities, cooperation with local financial institutions as well as the further development of the programme.
Below is the interview full text.
What is the GEFF?
GEFF is the Green Economy Finance Facility of the EBRD (European Bank for Reconstruction and Development) and supports local businesses as well as private individuals to invest in green technologies. The GEFF, in general, operates in 24 countries, and has so far enabled more than 120 thousand clients to save as well as to avoid around 7 million tonnes of CO2 emissions, year after year. This is a really significant amount.
The GEFF goes beyond providing credit lines and ensures consistent quality and innovation in the GEFF product and service delivery. In addition, advisory services are available to support PFIs and their clients to improve their market practices.
In Armenia the GEFF is supported by various donors: the Green Climate Fund, the Climate Investment Fund, the European Union and Austria.
Why is the GEFF active in Armenia?
Climate protection, and consequently energy efficiency and renewable energy too, are not only a matter of concern for economically well-developed countries. Therefore, in Armenia we help local businesses to become more competitive by investing in high-performance technologies and adapting green finance practices. Apart from finance and advice, the GEFF also provides additional investment incentives for certain types of technologies such as solar water heating systems and solar PV power stations. By the way, in these cases, local businesses can obtain a 20% grant. In other words, 20% cashback on the loan amount.
Moreover, looking at the region as a whole, we don’t just operate in Armenia. We recently started preparing to implement the GEFF in Georgia and there are also plans to roll it out in Azerbaijan in the future.
What are you doing in Armenia specifically?
In Armenia, we support the country’s green economy transition through local partner financial institutions, in other words: banks. At the moment we are working with Ameriabank and have recently started cooperating with a second partner – ArmSwissBank. I can already tell you that we expect more banks to get involved in the GEFF activities in the future.
How do we work with them? In general, the EBRD supplies credit lines to these partner financial institutions and the project consultants provide technical assistance in order to enable the banks to finance green investments in Armenia in a targeted way. In addition, we provide advisory services to both the banks and to local businesses. For the banks, our services include support in the implementation of green lending approaches, related lending schemes, processes, procedures, forms and templates – all of which fulfill the requirements needed to enable the banks to disburse such green loans systematically and competently.
We also support the banks with the development of targeted green marketing activities, such as organising joint promotional events with local suppliers in order to inform businesses in the area about the benefits of green investments. We have noticed that a lot of businesses are still not aware of the advantages that a company can enjoy if it invests in green technology.
Finally, one of our most important activities is staff training and capacity building for the banks. After all, we want them to be able to disburse green loans not just now but in the future as well because this will make a sustainable contribution to stimulating the country’s long-term economic transition.
There are benefits for local businesses too: we can help them to increase their competitiveness by identifying and selecting the most promising potential investments. We have a team of local technical experts who can visit businesses to analyse their needs and provide targeted consultancy services. I should also mention that this service is completely free of charge for the businesses.
The GEFF activities are broadly implemented and very different. Can you tell us about the GEFF team?
The GEFF provides highly individualised support to our target groups, and to do this we need a strongly motivated team.
On the one hand, there is a transnational management team which is in charge of our activities in the Caucasus region. This consists of a Project Manager, a Lead Engineer and a Lead Marketing Specialist. So, you can already see the three works streams which we actively implement in Armenia: Banking and Finance, Technology and Engineering, Marketing and Communication.
Secondly, and this is very important, we have a local project implementation team which includes a Deputy Project Manager, a PFI Relationship Manager, a Marketing Expert, a Senior Engineer and a pool of local technical specialists. This team is vital as it enables us to address the demands we have from both banks and businesses.
In addition, depending on the specific circumstances of certain investments, additional international experts from abroad can be involved ad hoc.
How do you select the local partner financial institutions?
The participating banks are selected by the EBRD based on specific criteria. These include, for example, the economic reliability of the bank and its market access – in this respect, the regional coverage and particularly the branch network is very important. The bank’s profile is also important and, last but not least, its client target groups are a major factor.
For us as consultants, it is very important that the bank has the right motivation and the commitment to implement green landing activities. I can already tell you that there is high demand from banks and we have already held several meetings with a number of additional banks that would like to become involved in the GEFF project in Armenia.
What is a green investment?
Green investments are for projects whose purpose is to benefit the environment. The GEFF distinguishes between investments related to energy efficiency, to renewable energy and to resource efficiency.
With regard to energy efficiency, the minimum requirement is for a 20% saving in energy consumption and/or CO2 emissions, which sounds quite high but is not particularly challenging in reality, as new equipment and machinery as well as high performance technologies usually meet this criterion easily. In Armenia, we have analysed various projects implemented in the past and have learnt that when replacing an old piece of equipment with a new one with high-performance technology, usually, on average, the energy savings range from 35 to 42%, which is really significant. Unfortunately, the final beneficiaries – local businesses – are often unaware of the extent of the savings they could make. This underlines just how important it is to undertake awareness raising activities and promotional events in order to inform them about it.
With regard to renewable energy, the criteria are met if the investment exploits renewable energy resources. In order to give you a few examples, solar water systems, geothermal based heating systems or solar PV power plants are typical RE investments.
Finally, I mentioned a third component: resource efficiency. This is quite a new topic but it is becoming more and more important as it aims to make the most efficient use of our available resources. In order to give you an idea what I am talking about, I’ll take the example of water efficiency. You know the local food processing industry with its meat and cheese production – Armenian people like good barbecues and tasty cheese. Hygiene and sanitary requirements demand many cleaning processes using water; very often the water is just taken from the mains, used for cleaning and then wasted afterwards. Here it would make sense to implement water efficiency measures, whereby the water could be recycled and filtered, enabling it to be used several times. Another example of resource efficiency would be sustainable land management. This third component has not yet been implemented; however, we are currently in the preparation phase and plan to introduce it in Armenia at a later stage of the GEFF project.
When talking about green investments, I think it is also very important to mention that a lot of local businesses are not fully aware of all the benefits they can get from making green investments. Usually, a business owner easily understands the resulting energy cost savings, but such investments also come with a lot of other connected benefits.
We recently conducted a promotional event with a partner bank in order to inform our target group – the local businesses – about the investment opportunities and associated benefits. Look, I can show you two slides from this specific awareness raising event. You can clearly see, depending on the type of business activity and the specific green investment, the benefits can be many and varied.
If you are a producer, you can – for example – get benefits such as improved product quality, increased output and a wider product range. Not to mention increased production reliability, labour efficiency, better working conditions for the staff and – a very important aspect – usually also improved safety for the workers, as well as reduced operational and production costs, all brought about by energy savings and lower maintenance costs.
For service providers, typical additional benefits could be improved service conditions, service quality and, crucially, a better customer satisfaction level.
The type of business activity is immaterial for green investments: different types of company – supermarket, farm, a food processor or even a fitness centre – will have different investment opportunities as well as associated benefits. Businesses should not think short term, it is important to convince them to think long term and to be prepared for the future in order to benefit from the long-term gains.
How can a bank analyse the energy efficiency criterion of 20%?
This is not so difficult as there are more than 1,000 pre-defined technologies, I mean products, equipment and machinery. Our local GEFF team analysed the Armenian market in great detail together with more than 100 local suppliers – manufacturers, traders and service providers – and we identified a great many products which easily meet the 20% criterion. All of these products are listed on the internet-based Technology Selector.
The bank just needs to check whether the equipment which its client plans to purchase is registered on the Technology Selector. If so – it is pre-approved and the bank generates the associated certificate which is the proof needed to disburse and flag this loan as a green investment under the GEFF. And finally, for certain types of investment, this also serves as the approval for the investment incentives already mentioned.
If the equipment is not listed on the Technology Selector, the bank informs us and we immediately start to conduct a technical assessment, which is a very simplified energy audit focusing on this specific piece of equipment. I already mentioned that we have a local team consisting of technical experts which is ready to react immediately. This means that after the call from the bank we usually start investigating the same day. We conduct an analysis and the bank gets the result of the assessment at the latest the next day, often even on the same day. In addition, as part of the assessment process, we also try to identify a local market supplier; the main reason for this is to motivate suppliers and persuade them to register their companies and the available equipment on the Technology Selector.
What is the difference between your programme and other IFI interventions?
In general, it should be mentioned that there is mutual coordination of activities between the IFIs. The purpose of this is to avoid overlapping and therefore they focus on different activities. This means that, for example, only the GEFF in Armenia provides investment incentives for certain types of technologies.
Another difference is the high number of standardised pre-approved technologies. By this I mean the GEFF Technology Selector, which summarises and describes so many high-performance technologies which are automatically eligible for the bank’s green lending activities. It is really a unique tool and it is much appreciated by the banks as they have a high level of independence when making assessments. For such pre-approved investments – the majority of all green investments – an external consultant is practically not needed.
What are the GEFF’s plans for the future?
For the future, we have many ideas and a lot of plans. I can already tell you, that we are planning the following three key activities:
At the beginning of our interview I mentioned that in Armenia we currently focus on local businesses, so the first of our plans is to extend our services to private individuals.
Secondly, we would like to involve additional partner banks. We are in the negotiation stage with a number of financial institutions and are actively helping new partner banks in their preparations. Additional partner banks are very important in order to create competition between these institutions and also to achieve greater regional coverage in Armenia as currently our existing two partner banks’ branch networks do not fully cover the country. For us it is very important to include additional partner banks to give all local businesses the opportunity to benefit from our services and this financial support, regardless of where there are located, in all of Armenia’s regions.
Finally, something I also mentioned earlier, another of our plans is to implement the resource efficiency investment component to complement the existing energy efficiency and renewable energy segments.
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